For banks – and especially for credit unions – the battle with the big technology companies for the hearts, minds and money of consumers is likely to be a more than difficult task.
After all, the role of big tech companies is pervasive in all facets of daily life, touching everything from commerce to search to social media to the actual devices in people’s hands (think Android and Apple) on which banking services and products are delivered.
In the report, “How High-Performing Credit Unions Stay Competitive Through Innovation,” a collaboration between PYMNTS Intelligence and Velera, we found that even among the highest-performing credit unions (CUs) with relatively high member satisfaction scores, a majority (56%) view Big Tech as their primary competitors. Overall, 28% of CUs say they compete with Big Tech.
Digital wallets and the supervision of major technology companies
Of course, there are signs that competition is only going to get tougher. As seen in recent months and as noted here, the Consumer Financial Protection Bureau (CFPB) has been trying to extend the same oversight that already exists for banks and credit unions to Big Tech companies over the past year. Oversight would apply to companies that record a volume of more than 5 million transactions per year, which of course includes everyone from Apple to Amazon to Meta’s financial ambitions. In total, the CFPB’s rulemaking would add 17 new companies to its purview, companies that processed about 12.8 billion transactions in 2021 with an estimated value of about $1.7 trillion, covering 88% of known transactions in the nonbank sector.
The technology companies have a critical mass that could seemingly put the CUs at a disadvantage, especially given the user-level data they contain and provide in real time.
If data is the gold, the oil, the… well, name the precious commodity here as a metaphor… that underpins banking services, it’s worth noting that last year, 57% of consumers said they trusted banks to keep their credentials safe, outpacing major technology companies.
Some of the benefits
Traditional financial institutions (FIs) are already regulated and have been for decades as they seek to innovate and fund those innovations with the deposits already on their books. But at forward-thinking banks, particularly credit unions, we found in playbooks and interviews that two-thirds of CU members want more payment options. The CUs that invest time and effort in digital/omnichannel initiatives invest 13% more in payment innovation than the laggards and benefit from 57% lower member churn, potentially mitigating the migration of “churned customers” to Big Tech.
Banks themselves have insight into payment behavior and account usage, which can help them be proactive in driving customer loyalty. While Big Tech companies access their customers via mobile devices, banks have the digital capabilities and the ability to capture their customers’ attention in their branches and offer them loans and other services in a data-driven context.
